A small Virginia-based natural gas producer has asked the Federal Energy Regulatory Commission to reassert jurisdiction over a network of gathering facilities in the Appalachian region, claiming Columbia Gas Transmission Corp. and its gathering affiliate, Columbia Natural Resources Inc. (CNR), are acting “in concert” to manipulate gathering rates and thwart competitive transportation service.

In a complaint filed by Energy Development Corp. (EDC), the producer said the alleged anti-competitive action was occurring on the unregulated V-33 gathering system in West Virginia and Virginia, which Columbia Gas Transmission spun down to CNR in April 1997, and on a connecting intrastate pipeline, Cranberry Pipeline Corp., an affiliate of Cabot Oil and Gas Corp. The V-33 facilities had been a regulated pipeline for several decades, but were reclassified by FERC as unregulated gathering five years ago.

Prior to the spindown, gas entering the then-Columbia Gas Transmission V-33 gathering system was transported to the pipeline’s mainline under its existing tariff rate with no additional fees payable to either Columbia or Cranberry, said EDC, but it added that the situation has changed dramatically since then, with both Columbia and CNR exerting market power over captive shippers.

Shippers now “are forced to either transport gas through the V-33 and Cranberry systems at a cost of $1.21/Mcf for gathering or sell gas on the V-33 system to Cabot at a huge discount in addition to paying excessive gathering and [retainer] fees to CNR,” the producer told the Commission [RP03-163]. The fees amount to more than 30% of the value of EDC’s gas, and are on top of the transportation rate charged by Columbia for gas entering its mainline system, EDC estimated.

As a result, “captive shippers such as EDC and others are being prevented from having equal access to the market. By having to pay upwards of 35% of the value of the gas just to get gas to a transmission line where it can be sold, shippers such as EDC are being placed at a major competitive disadvantage,” according to the producer.

By approving the spindown of the V-33 system, FERC “has allowed Columbia through its affiliate CNR to impose unjust and unreasonable rates for transportation of gas and to impose other anti-competitive terms and conditions of service,” EDC said. “It is clear that the V-33 system at issue…is a facility that should never have been allowed to be reclassified as gathering.”

EDC’s request is not without precedent. In early September, FERC reasserted jurisdiction over the portion of the North Padre Island (NPI) unregulated gathering facilities that Transcontinental Gas Pipe Line spun down to its gathering affiliate, Williams Field Services Co. (WFS). The Commission took this action after finding Transco and WFS “acted in concert” to push gathering rates to monopolistic levels on the NPI offshore Texas facilities and to frustrate effective FERC regulation of Transco’s interstate transportation system (see NGI, Sept. 9).

EDC requested that FERC act on its complaint before NiSource Inc., parent of Columbia and CNR, follows through with its plan to sell CNR during the first quarter of 2003. “It is important to resolve this matter while CNR and Columbia are still affiliated. A sale of the V-33 system to an unrelated third party would make it more complicated for the Commission to reassert jurisdiction.”

In addition to reasserting jurisdiction, EDC has called on the Commission to order Columbia and CNR to continue providing uninterrupted service to the producer until the complaint case is resolved.

EDC said its gathering agreement with CNR expired last Jan. 31, and since then, CNR has extended the agreement on a month-to-month basis. During this period, the fee to retain the gathering service has risen to 5.93% from 4.25%, and CNR “unilaterally” has raised its gathering fee to 34 cents/Dth from 32 cents/Dth, the producer said.

It estimates it is losing $18,150 a month as a result of the change in the jurisdictional status of the V-33 system to gathering, and an additional $9,075 a month due to an “arbitrary production limit” (500 Dth/d) that has been imposed by CNR on EDC.

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